Gold Price Forecast: XAU/USD tracks relief rally in global markets, eyes on Iran war
- Gold builds on the previous rebound from near $5,000 early Tuesday as risk sentiment recovers.
- The US Dollar consolidates the overnight drop, led by Trump’s comments that the Iran war could be ‘over soon’.
- Technically, Gold needs a daily closing above 61.8% Fibo level at $5,141 for a sustained move higher.
Gold is finding fresh demand, building on its previous rebound in another attempt to regain the $5,200 barrier on Tuesday.
Gold cheers global relief rally, USD pullback
Gold buyers are back in charge, capitalizing on a relief rally seen across the financial markets as the Oil price upsurge fizzles and traders anticipate that the end of the Middle War could be near.
The optimism triggered a risk-on wave across the board after US President Donald Trump told CBS News on Monday that "I think the war is very complete, pretty much. They have no navy, no communications, they’ve got no Air Force.”
Early Tuesday, the Wall Street Journal (WSJ) reported that Trump’s “advisers privately urged him to look for an exit plan amid spiking oil prices and concerns that a lengthy conflict could spark political backlash,” prompting the President to publicly announce that the military campaign in Iran could end soon.
Further, Trump's comments and fresh reports suggesting Washington may soften sanctions on Russian energy, also added to the market relief as Oil price turned sharply lower on the day, following the 25% spike to three-year highs.
The recovery in risk sentiment triggered a big sell-off in the US Dollar (USD) as markets ditched the safe haven and the global currency reserve in favor of Wall Street stocks.
However, any downside in Oil prices is likely to remain limited as some of the Gulf countries have scaled back their oil production amid the closure of the Strait of Hormuz, keeping concerns over supply disruption alive.
Additionally, Iran’s Islamic Revolutionary Guard Corps’s (IRGC) response to Trump’s conciliatory remarks leaves investors on edge and Oil prices supported. IRGC said that Tehran will determine when the war ends, not the United States (US), adding that “Tehran would not allow export of one litre of oil from region if US, Israeli attacks continue.”
If Oil prices resume their upside, the USD could once again attract haven bids, boding ill for the USD-denominated Gold. Also, surging oil prices stoke inflation fears and fade expectations surrounding US Federal Reserve (Fed) interest rate cuts, serving as negative for the non-yielding bullion.
That being said, traders also remain wary ahead of the US February Consumer Price Index (CPI) data due for release on Wednesday. The inflation data could provide fresh hints on the Fed’s policy path, significantly impacting the Greenback, which could move Gold.
In the meantime, all eyes remain on the headlines from the Middle East war.
Gold price technical analysis: Daily chart
The near-term bias is mildly bullish as price holds above the rising 21-day and 50-day Simple Moving Averages (SMAs), while the 100-day and 200-day SMAs also trend higher well below the market, reinforcing an established uptrend. The latest Relative Strength Index (RSI) reading around 55 stays above the neutral 50 line, indicating positive but not overstretched momentum after digesting recent gains. Price has rebounded from the 38.2% Fibonacci retracement at $4,858.82, measured from the $4,401.99 low to the $5,597.89 high, which underpins the view that buyers still defend pullbacks within the broader advance.
Immediate support emerges at the 50% retracement at $4,999.94, ahead of the 38.2% level at $4,858.82, where prior demand coincides with the cluster of intermediate moving averages. A break below that area would expose next support toward the 23.6% retracement at $4,684.22. On the topside, initial resistance aligns with the recent highs near $5,263.55, followed by the Fibonacci barrier at the 61.8% retracement at $5,141.05 now acting as a reference level within the range and the more distant swing high at $5,597.89. A daily close above $5,263.55 would open the path toward retesting $5,597.89, while failure to hold above $4,999.94 would temper the current bullish bias toward a broader consolidation phase.
(The technical analysis of this story was written with the help of an AI tool.)
Risk sentiment FAQs
In the world of financial jargon the two widely used terms “risk-on” and “risk off'' refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.
Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.
The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.
The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.
Author
Dhwani Mehta
FXStreet
Residing in Mumbai (India), Dhwani is a Senior Analyst and Manager of the Asian session at FXStreet. She has over 10 years of experience in analyzing and covering the global financial markets, with specialization in Forex and commodities markets.
